Tuesday, September 27, 2005

“The Rig Devastation is Quite Significant”


The best energy industry research firm I know is Petrie Parkman, run by oil research veteran Tom Petrie—a man I interviewed with 25 years ago when I was first looking for work on Wall Street, although he wouldn’t remember me from the Sith Lord.

And from their morning research notes comes the following comment regarding Rowan Companies, a large operator of jack-up drilling rigs in the Gulf of Mexico:

Rowan has its own planes and were thus one of the first on the scene to witness the impact. They say that the rig devastation is quite significant and the pilots reported that in an area where they previously would see about 15 jack-ups there were none visible.

"None visible."

Of course, while Rowan was flying planes over the area where there were no rigs “visible,” the stock market had already decided the impact of Hurricane Rita was not too severe, based largely, I gather, on the fact that Fox and CNN TV reporters in rain gear were able to walk around parking lots in Galveston shortly after the storm passed and could see no visible damage to the infrastructure miles out in the Gulf of Mexico.

By the end of yesterday, however, the oil markets had corrected the market’s misinterpretation of the Talking Heads’ somber yet relieved reports, and bid oil prices back up—while natural gas never even bothered to head-fake anybody, and just stayed strong.

Meanwhile, Rowan sees a more significant impact on their business besides the loss of a few of their own rigs, thanks to the apparent disappearance of so many other rigs in that region: drilling rates in the Gulf should “sky rocket,” according to the Petrie Parkman note.

No inflation indeed!


Jeff Matthews
I Am Not Making This Up



© 2005 Jeff Matthews

The content contained in this blog represents the opinions of Mr. Matthews. Mr. Matthews also acts as an advisor and clients advised by Mr. Matthews may hold either long or short positions in securities of various companies discussed in the blog based upon Mr. Matthews' recommendations.

6 comments:

Sith Lord said...

If your friend can't pick me from you then I am in deep trouble.

Unless you are the Sith Lord.

dthorn said...

Who cares? GOM rig counts have been declining independent of weather as rigs head for other regions of the world - who wants to drill there anyways? dayrates are high, regulatroy costs are high, insurance costs may now be out of sight. US land rigs mean while set a new record + 15 to 1,451 for the week. So we have a loss of 6 jack-ups (the hot market is deep water rigs in anycase) vs. +15 land rigs.

Demand destruction. 20% of NG consumption is residential. Does anyone seriously think thermostats are going to be set at the same level as last year when heating bills will double? Particularly when last year was already high.

Electricity generation has been the driver in NG demand growth. NG and coal are fungible on the margin here. Coal is significantly cheaper than NG on a BTU basis. Which would you use?

Even with the hurricane impact, NG inventories are likely to end the injection season (~10/31) above 5yr average of 3.1 tcf.

Its a COMMODITY, and you complain ("Housing bubble topped end of August") that homebuilders are price takers? Is Mr. Petrie that much smarter than Mr. Toll? Lease land drill hole. Even a contractor can play this game. And those nice rigs the Chinese are shopping around sure look pretty in the arkoma basin.

UrsaMajor245 said...

Here's more confirmation of rig damage (as if Henry Hub natural gas spot prices weren't sufficient):

http://www.rigzone.com/news/article.asp?a_id=25553

HoosierDaddy said...

In regards to coal being cheaper,that means precious little if the utilities cannot obtain it. Coal has increased in price due ro supply disruptions from the Powder River Basin.
USA Today (8/24)
http://www.usatoday.com/money/industries/manufacturing/2005-08-24-coal-usat_x.htm

There was also a write up of the issue in the September 2005 issue of Trains (not available online)

Union Pacific and Burlington Northern were still having issues this month .
http://www.uprr.com/customers/energy/sprb/updates.shtml

Its_strange said...

Starting Nov 1st my apartment rent goes up 8%.

buy kamagra said...

In regards to coal being cheaper,that means precious little if the utilities cannot obtain it. Coal has increased in price due ro supply disruptions from the Powder River Basin.
USA Today (8/24)